Filmart: Can Japan Make Anime Great Again?

With box-office phenomenon 'Your Name' leading the way, Japanese animation is on a roll, but to survive the country's aging demographics, it must attract more young artists and truly cross over globally.

The buzz surrounding Japan's animation sector has been hard to miss lately. The industry just landed its biggest hit ever with the $330 million global box office of Makoto Shinkai's Your Name, the Scarlett Johansson-starring live-action Hollywood take on Ghost in the Shell has generated more anticipation than any previous adaptation before it hits theaters next month, and anime TV series' overseas sales are booming thanks to VOD platforms and growing demand from China. Meanwhile, there are rumors that anime master Hayao Miyazaki is returning for one last feature.

Despite recent successes, all is not well in the land of anime: TV series continue to lose money on their domestic broadcasts, while low wages for junior artists are causing a dearth of animators entering the industry. As Japan's population continues to fall, anime needs to take its success in the global market to the next level. But without fresh talent that simply won't happen.

According to figures from industry group the Association of Japanese Animations (AJA), revenue for the entire sector grew 12 percent to $16 billion in 2015, with sales of streaming rights to China jumping 79 percent, and likely grew again last year. (As many Japanese companies run their financial year to the end of March, figures for 2016 aren't available yet). To put that $16 billion into perspective, the entire theatrical box office in Japan last year was $2.1 billion, a record, and one boosted considerably by the $220 million domestic take of Your Name.

The huge success of Shinkai's teenage body-swapping tale has certainly boosted interest in all things anime. A sales rep for a major Japanese entertainment company says that at recent international content markets they were inundated with questions about anime features, even ones they weren't selling, by buyers looking for the next Your Name. However, Haruka Kasai, from the international sales and licensing department of major studio Toei Animation, says Your Name was "a special case" and isn't making a significant difference to the market. Genki Kawamura, the Toho hit-making producer behind Your Name, also doesn't believe its rising tide will lift all boats.

"It's definitely a good time for anime. Until recently, apart from Studio Ghibli films, there weren't many really big anime hits, but now there a lot of talented creators producing good stories. But even in a period like this, only good-quality films will be successful," Kawamura tells THR.

Nevertheless, six of 2016's box office top 10 were anime. While Your Name was the undisputed box-office king, it was beaten to the best animation gong at this month's Japan Academy Prize awards by In This Corner of the World (Kono Sekai no Katasumi ni). Directed and co-written by Sunao Katabuchi, and without a major studio behind it, the story of wartime Hiroshima and the atomic bombing was partly crowd-funded and made for little more than $2 million. Resonating with a much older audience demographic — though an increasingly important one in graying Japan — than most anime, it took $20 million domestically and has secured a wide global release, including in the U.S. through Shout Factory.

Japan's rapidly aging and slowly shrinking population means the anime industry has little option but to focus more on the global market, something it has done with mixed results in the past. The collapse of the global DVD market — once its biggest overseas revenue stream — has hit anime hard. But the rise of VOD platforms like Netflix and Amazon is bringing new opportunities.

Members of anime's often obsessive global fan base often translate and subtitle Japanese releases, uploading pirated versions for free online, cutting into DVD sales and potential revenue from theatrical releases. The animation studios and distributors have responded by bringing forward overseas release dates for both the big and small screen.

Ko Mori, who runs Eleven Arts, an L.A.-based distributor of Japanese films, says that the change has helped boost the U.S. anime market over the last couple of years.

"Although it is a very niche market, more titles are getting released theatrically, which is being helped by shorter delays for titles reaching the U.S. after the Japanese release date," says Mori. "We don't want to release anime films in the U.S. after the Japanese DVD or VOD release, because of piracy." Eleven Arts released Sword Art Online The Movie: Ordinal Scale on Mar. 9 in the U.S., about three weeks after it opened at No. 1 in Japan with $3.7 million in its first two days, despite only being on about 150 screens. The U.S. release is on around 600 screens, approximately double the number for recent big anime titles handled by Eleven Arts.

The most important market for anime remains East Asia, but it's less than two years since Japanese films returned to Chinese theaters, following a three-year hiatus due to a territorial row over a group of disputed islands. The return of Japanese content was spearheaded by the theatrical release in the summer of 2015 of Stand by Me Doraemon, which went on to take more than $80 million, beating its box office in its home market. That was the best performance ever for a Japanese film in China, only to be topped at the end of last year by Your Name.

Ironically enough, geopolitical tensions may now give a further boost to anime, since China has (unofficially) banned programs and films featuring performers from South Korea. The row over the government in Seoul's announcement that it would deploy the U.S.-made THAAD missile defense system has created a vacuum where popular Korean content once was.

"Because they can't broadcast programs from South Korea now, Chinese buyers are looking for more content from Japan," says Toei Animation's Kasai. Joseph Chou, anime and film producer, as well as president of Sola Digital Arts studio in Japan, points out that China's row with South Korea was "totally unexpected," but that a similar blow up could happen again with Japan.

Hedging against that political risk is one of the factors driving Chinese companies to work on more co-productions with Japanese anime studios. Japan's DandeLion Animation Studio and China's leading drone company Da-Jiang Innovations Science and Technology this month announced a tie-up for RoboMasters: The Animated Series. The six-episode show will be based on a real robot battle tournament featuring teams from around 200 schools in China. The project took two years to come to fruition and is slated to be broadcast first in China, according to DandeLion.

But while the appetite for anime is high in China, buyers have recently become more discerning, according to Toei Animation's Kasai, who says "in the past they would buy nearly anything if it was Japanese anime."

Producer and studio president Chou says that while the influx of capital and demand from China is creating something of a boom, the money is not trickling down to the anime creators and artists, with serious potential ramifications for the industry's future. "If you're looking for content in the anime pipeline, there's often nothing till 2018, 2019 or even 2020; a lot of it is already spoken for. If there is no market downturn, that is going to become a problem," suggested Chou.

According to the Japanese Animation Creators Association, an industry union, a key animator in their mid-30s earns an average of $24,500 annually, while their young assistants have to get by on $9,750.

Those numbers don't reflect the true situation, according to Naoki Ishikawa of the AJA, which represents the studios. "The truth is that there are a lot of anime artists making 5 to 10 million yen [$43,500 to $87,000]. The people making that kind of money definitely don't talk about it, but those not making much money do talk about it. So everyone thinks all the wages are so low," says Ishikawa. Average wages are not generous, concedes Ishikawa, who says that the peculiar business model for domestic TV series broadcasts, the mainstay of the industry, is to blame.

"For anime TV series, the productions are all basically still in the red when they are broadcast. They only begin to make money if fans who watch the series then buy merchandise," explains Ishikawa. As if that weren't bad enough, all of the commercials that run during TV anime broadcasts in Japan are from the companies that made them. "So there's effectively no revenue from TV broadcasts and no drivers to increase revenue from them," says Ishikawa. "If the related merchandise doesn't sell, then they run at a loss."

In fact, the industry makes twice as much money licensing its characters for pachinko — a Japanese gambling game — than from TV and theatrical box office combined, and double that again from merchandising. "The successful studios are swimming in offers, but smaller ones, with just one pipeline are suffering because of HR resources; it's becoming very difficult for smaller studios to get artists," says Chou.

Compounding the problem is a lack of young talent, a challenge that once again points to Japan's graying population. Adds Chou: "A lot of the really good guys are in their 40s, 50s or even 60s, but there are not that many of them left."